8 Exceptions to the 10% Penalty for an Early IRA Withdrawal

Think long and hard because you may have to pay a nice little 10% penalty for early IRA withdrawals!

IRA penalty – Oh yeah, Uncle Sam will love you!

If you are age 59 1/2 or older, you can take an IRA withdrawal without any penalties at all.

If you’re younger than age 59 1/2 you’ll have to pony up for an IRA penalty – unless of course you meet one of the exceptions below.

IRS publication 590 lists these exceptions to the 10% penalty for an early IRA withdrawal:

1. You take an early IRA withdrawal and you have unreimbursed medical expenses that are more than 7.5% of your adjusted gross income.

If you have a lot of medical debt, you may be able to take out IRA money without that 10% penalty. Remember, medical expenses must be higher than 7.5% of your adjusted gross income.

2. You can take an early IRA withdrawal for medical insurance

As long as your IRA distribution is not more than you paid for medical insurance you will not have to pay a 10% penalty if the following applies:

You lost your job

You received unemployment for 12 consecutive weeks because you lost your job

You receive the IRA distributions during the year you received unemployment or the following year

You receive distributions no later than 60 days after you’ve been re-employed

3. You can take an early IRA withdrawal if you are disabled.

Bad news – you’re disabled. Good news – no penalty. Not sure I’d really want to qualify for this one, but it is there. Be sure to file a special tax form with your 1040 that lets the IRS know that you are disabled!